Tesco Considers Sale of Struggling Polish Unit
Tesco Considers Sale of Struggling Polish Unit
(Bloomberg) -- Tesco Plc is considering a sale of its struggling Polish operations, according to people familiar with the situation, as the U.K.’s largest retailer focuses on its domestic operations and more promising overseas markets.
The supermarket operator has begun a review of the Polish arm, according to the people, who asked not to be identified discussing a private matter. The deliberations are at an early stage and the company might decide against a sale, they said.
Tesco shares rose as much as 2.3% in London. They’ve risen 29% this year.
A Tesco representative declined to comment.
With 348 stores as of June, Poland is Tesco’s largest central European business. It has struggled amid intensifying competition, especially in general merchandise, and a reduction in store-opening hours. It had an operating loss of 11 million pounds ($14 million) last year on sales of 1.9 billion pounds.
Tesco has been scaling back its overseas presence in recent years, pulling out of the U.S. in 2013 and South Korea two years later. In 2016 it sold a majority stake in the Turkish Kipa chain. In Thailand, however, it’s eyeing 750 new convenience stores in the medium term.
Tesco Poland closed 62 stores last year and began shrinking its largest big-box outlets in August, helping it to a small profit in the second half of last year. The company said it was completing the sale of its eight largest so-called hypermarkets in July.
In central Europe, Slovakia, Hungary and the Czech Republic have outperformed Poland. Overall, sales in the region fell 2.3% last year.
‘A Drag’
“Tesco would bite somebody’s hand off if they wanted to buy the Polish business, said Clive Black, head of research at Shore Capital. “It has always been a drag.”
It’s not the first time Tesco has considered options in its central and eastern European operations. In 2015 the company considered a regional divestiture, people familiar with the situation said at the time.
In the fiercely competitive British market, where retailers have been squeezed by the shift to online shopping and consumer jitters stemming from Brexit, the company has leveraged its size and a purchasing agreement with France’s Carrefour SA to push down costs and shore up profit.
Chief Executive Officer Dave Lewis has also agreed to offload the grocer’s home-mortgage portfolio to Lloyds Banking Group Plc. Tesco is set to announce first-half results on Wednesday.
To contact the reporters on this story: David Hellier in London at dhellier@bloomberg.net;Ellen Milligan in London at emilligan11@bloomberg.net
To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Eric Pfanner
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